As we move into the second half of the year, June is the perfect time for a financial checkup. One of the most important areas to review is your tax withholding and estimated tax payments.
Many taxpayers set their withholding in January and never revisit it. However, your tax situation can be significantly affected by life changes throughout the year. A mid-year review can help prevent unpleasant surprises next spring, including unexpected tax bills or underpayment penalties.
Start with Last Year’s Tax Return
A good starting point is to review the 2025 tax return you recently filed.
- Did you receive a large refund?
- Did you owe more than expected at filing time?
- Were you surprised by your tax outcome?
A large refund could mean that too much is being withheld from your paycheck throughout the year, while a large balance due could indicate that withholding or estimated payments need to be increased. Reviewing last year’s results can help you make adjustments now instead of waiting until next tax season.
Why Review Your Withholding Now?
Your tax withholding may need adjustment if you have experienced changes such as:
- A raise, bonus, or new job
- Marriage or divorce
- A new child or dependent
- Retirement or starting Social Security
- Investment income increases
- Side business or freelance income
- Changes in deductions or credits
If too little is being withheld, you could owe more than expected at tax time. If too much is being withheld, you may be giving the IRS an interest-free loan throughout the year.
Self-Employed or Paying Estimated Taxes?
If you are self-employed, earn freelance income, have substantial investment income, or receive income not subject to withholding, now is also the time to review your estimated tax payments.
Remember: Second-quarter estimated tax payments are due June 15.
Missing or underpaying estimated taxes can result in penalties, even if you receive a refund when you file your return.
Keep Track of Your Tax Payments
Be sure to keep records of any estimated tax payments you make throughout the year, including payment dates and amounts. This information will be needed when preparing your 2026 tax return.
Missing or incorrect estimated payment information can delay processing of your return or even cause you to pay more tax than necessary until the payments are properly verified.
If you make payments electronically, save confirmation numbers or copies of payment receipts with your tax records.
Don’t wait until tax season to find out your withholding or estimated payments were off target. Reviewing your tax situation now gives you time to make adjustments before the end of the year and helps reduce the likelihood of unexpected tax bills or penalties next spring. A few simple mid-year adjustments today can help keep your overall financial plan on track for the remainder of 2026.
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